Air Canada incurs $213 million 1Q loss amid labor strife

Air Canada (AC) reported a first-quarter net loss of C$210 million ($213 million), widened from a C$19 million net loss in the 2011 March period, and acknowledged that recent labor unrest has been damaging to AC’s company culture and public brand.

But the carrier pointed out that much of the net loss was attributable to non-cash, one-time items and that its cash position remains strong (over C$2.2 billion in unrestricted cash-on-hand at quarter’s end, up C$150 million from the end of 2011). It also had strong yield growth on both transpacific and transatlantic routes, and CEO Calin Rovinescu told analysts Friday that a federal mediation process now underway will bring AC’s labor contract issues to a final resolution “no matter what” within 90 days.

“We expected labor to remain a major focus for us in the first quarter … and that certainly turned out to be the case,” he said. The carrier saw tentative deals reached with the leaders of its largest unions fall through, and maintains that “wildcat strikes” by pilots led to service disruptions that caused the airline to lose bookings from a Canadian public wary of the wrangling between the country’s largest airline and its workers.

“Our brand is strong and resilient, but we can’t take it or our passengers for granted,” Rovinescu said. He added that while AC is willing to pay workers “good wages and benefits,” it needs labor to agree to contract changes that drive “dramatically improved” operational efficiency.

The damage to AC’s culture and brand “is recoverable,” he said. “Lots and lots of stuff needs to change [in terms of how the airline operates] … Large scale transformation of a legacy carrier such as ours to compete in the new world is not without its challenges … We’re chipping away at many, many, many inefficiencies inherent in a legacy environment such as this.”

AC’s first-quarter revenue rose 7.6% year-over-year to C$2.96 billion and passenger yield lifted 3.3%, including an impressive 12.8% increase in transpacific yield. AC achieved “solid passenger revenue results in the quarter, which is attributed to strong passenger demand and yield growth,” Rovinescu said, adding that returning to profitability “is certainly the objective. Does it happen overnight? No.”

Article Source : ATW Daily News